3 minute read 16 Apr 2018
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Why portfolio transformation is a top M&A concern in boardrooms

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

3 minute read 16 Apr 2018
Related topics Capital allocation Digital

Amid accelerating change, identifying strategic gaps in portfolios is a main M&A priority for boards in 2018.

Portfolio transformation, including both the buying and selling of assets, tops the issues cited by executives as the most prominent mergers and acquisitions concerns they will be dealing with in the next 12 months. The paramount need to reshape portfolios in an era of accelerating change means a shift to an almost continuous assessment of current operations, risks and opportunities.

As the external environment in which companies operate is evolving, executives are looking to identify strategic gaps in their portfolio. Unless these gaps are filled, many companies may find themselves at a competitive disadvantage. Understanding the full breadth of their competitive ecosystem is more critical than ever.

Making sure they buy or build the accelerating technologies that will boost earnings and productivity needs to be done concurrently with analyzing the external industrial landscape.

These decisions are also having to be seen through the lens of increasingly vocal shareholders and the emergence of a more active government and regulatory environment.

What is your perspective on the global economic growth?

Q: Which of the following will be most prominent on your boardroom thinking during the next six months?

Boardrooms are focused on technology to improve decision-making and boost company performance

Companies are increasingly using analytics, artificial intelligence (AI) and instantaneous data gathering to make better-informed decisions about their portfolio.

AI and robotic process automation (RPA) are seen as the key technologies that the boardroom is considering. As such technologies become more widely adopted, they will influence every area of a company’s operations and decision-making processes.

Of course, access to data is the lifeblood of AI — and companies are more focused on ownership and control of data than ever before.

Another technology that boardrooms are currently focused on is cloud computing. This is where the data and technologies to understand the data collide. Cloud computing has also created much greater optionality around outsourcing IT infrastructure.

With the acceleration of technological advances, many companies are struggling with what hardware to buy, so they are leasing it instead. This has shifted major technology costs from the balance sheet to the P&L. The impact of this is still emerging, but may contradict the idea that companies have been cutting back on investment in the prior few years.

What is your perspective on the global economic growth?

Q: Which of the following technologies are most prominent on your boardroom agenda?

Activist shareholders and executives in tune about the need to transform business operations and portfolios

Both board members and activist shareholders are keenly focused on portfolio transformation and asset disposals. Where these two constituents differ is around the application of proceeds from asset disposals.

Executives have more of a bias to recycle capital into the portfolio whereas activists are looking to see a certain element of realized capital be returned to shareholders.

What is your perspective on the global economic growth?

Q: On what do you expect shareholder activists to focus their influence in the next 12 months?

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Summary

As technology becomes more widely utilized, companies must assess every aspect of their M&A decision-making in order to understand the full breadth of their competitive ecosystem.

About this article

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

Related topics Capital allocation Digital